Zimbabwe Central Bank Encouraging Businesses to Use Chinese Yuan

In recent years, China has been calling for the yuan to be accorded the same acceptance at the global level as the USA dollar and the euro. Adopting the yuan can bring discounts on Chinese imports, with some Chinese suppliers willing to strip out their own respective risks associated with dollar conversions. The government is aiming to make the yuan a more widely used global reserve currency after the International Monetary Fund announced the yuan’s admission into its benchmark Special Drawing Rights basket in November, traders said. Since then, the yuan depreciated around four per cent against the dollar, the largest five-month drop in over 20 years. This year’s loss is set to be the biggest in more than two decades. But its loans often come with strict conditions on natural resources and workers, as well as high interest rates.

According to the finance minister, Chinese tourists could start paying for services in yuan and Zimbabwe could use the currency to pay its loans to China. Since currency depreciation is not uncommon, why do fluctuations in the yuan receive so much attention? We also forecast annual net inflows into Chinese onshore bonds to increase by more than 40 per cent in the next two years.

The Chinese prefer investing in hard assets.

The One Belt is the modern-day Silk Road – China’s trade and investment links with economies in central and western Asia, Russia, the Middle East and Europe.

Longer trading hours could also help narrow the gap between the onshore yuan-the version traded within the mainland-and the yuan traded in what’s known as Hong Kong’s offshore market, the central bank said.

On Nov 30 a group of senior leaders in finance and American industry announced the formation of The Working Group on US RMB Trading and Clearing, which will seek to establish the trading and clearing of the Chinese currency in the United States. However, the imbalance may not be assisted by this move given that African exports to China have fallen while imports from China to Africa are increasing.

The People’s Bank of China won’t step aside from intervention fully or tolerate any excessive weakness in the yuan as capital leaves the nation, Koon How Heng, a foreign-exchange strategist at Credit Suisse AG’s private banking and wealth management unit in Singapore, wrote in a note on Sunday.

A shrewd move for sure but one that did not go unnoticed in political circles in both the USA and Europe. But when the USA raises rates, the dollar will be weakened.

The Fed’s trade-weighted dollar index reached a 12-year high on December 17 as the world’s largest economy strengthened and a rout in emerging markets propelled the greenback higher against the currencies of a broad swathe of USA trading partners including China. In practice, that means that any attempt by Beijing to artificially lower the value of the yuan would cause howls of protests and threats of retaliation from US politicians.